Homeritz's 1QFY25 headline net profit rose by 16.0% YoY to RM10.5m, primarily driven by higher sales volume. After adjusting for non-core items, the Group's 1QFY25 core net profit stood at RM9.2m (+13.4% YoY), in-line with our and consensus estimates at 28.3% and 26.8% of full-year forecasts respectively. We remain cautious about the overall furniture industry, as ongoing inflationary pressures are expected to weigh on consumer demand in the near term. All told, we maintain our FY25-26F earnings forecasts and reiterate our Neutral rating on Homeritz with an unchanged TP of RM0.62 based on a 9x PE multiple.

• Results review. Homeritz's 1QFY25 revenue increased by 14.7% YoY to RM61.7m, driven by stronger export sales due to the festive season. Homeritz's PBT rose by 12.4% YoY to RM13.8m. Both PBT and net profit margin remain flattish YoY.
• Outlook. We believe the overall outlook of the furniture industry to remain muted, given the on-going inflationary pressure, and slower rate cuts ahead. Meanwhile, rising mortgage rates could hamper US home sales moving forward. While the Muar facility fire will result in a RM3m loss, the one-off loss will be excluded from our core net profit estimates. However, we anticipate that Homeritz's earnings may still be impacted by delayed orders and other additional operational cost arising from the incident. Despite the near-term headwinds, we remain optimistic about the Group's long-term prospects, driven by its commitment in developing new products and innovative designs to cater to a more diverse customer base, as well as optimising cost structure.

Source: PublicInvest Research - 22 Jan 2025